£3m for 8 weeks of consultancy work: McKinsey given contract to advise UK.gov on tech project business cases

One of issues with public sector IT? Technical debt. £2.3bn to keep lights on in 2019, and £22bn more over next 5 years


Management consultancy McKinsey appears to be well placed to influence UK government’s future technology strategy after winning a £3m, eight-week contract to build business cases ahead of the Spending Review ’21.

An Expression of Interest was run on the Managing Consultancy Framework (MCF), the purpose of which was the Cabinet Office “seeking expert consultancy support to design the cross-departmental approach to tackling core digital, data and technology (DDaT) priorities, developing cross-government business cases and work plans.”

Among other things, the supplier was asked to "produce compelling business cases for investment" for the Government Digital Services (GDS) and Central Digital and Data Office (CDDO), ahead of the 2021 Spending Review.

The CDDO, a new unit which sits in the UK's Cabinet Office and looks after DDaT, was famously set up after the Cabinet Office was handed control of all the core government data, previously looked after by the Department for Digital, Media, Culture and Sport. It is led by Paul Wilmott, non-executive chair, who until August 2019 was a founder and managing partner at McKinsey Digital. Wilmott was not involved in the procurement, however, the Cabinet Office assured us, confirming it was "managed by the Crown Commercial Service". Coincidentally, Megan Lee, former engagement manager at McKinsey, joined CDDO in June this year as director of strategy and performance at CDDO. Asked to comment, the government said: "All recruitment is undertaken in line with normal Civil Service regulations."

The work under the £3m, eight-week contract includes providing consultancy on the digitisation of services and automation, establishing a government data exchange, creating a hosting strategy, migrating systems to a government hybrid cloud and tackling expensive legacy tech risk - highlighted recently in a damning independent report on Modernisation and Reform across government commissioned by the Cabinet Office.

McKinsey won this professional services contract, valued at £53,571 per day for eight weeks, after what onlookers described as a relatively brief procurement process: the Invitation to Tender (ITT) was due to be released to interested bidders on the afternoon of 21 June but actually came out the following evening. Bidders were to submit responses by 2 July but that deadline was bought forward 25 June. That gave them a full three days to do so.

When we asked the Cabinet Office about this, a spokesman claimed: "There was a slight alteration to the timescale of the procurement process to allow it to be carried out over two stages - giving shortlisted bidders the opportunity to do a presentation on their proposals."

What do the SMEs make of this?

“The ITT came out late and the response time was pulled forward by a week,” said one interested party.

In addition to McKinsey, EY, Bain and Boston Consulting Group are all understood to have competed for the contract.

Senior sources within government tech circles told us that McKinsey was sitting pretty. One said: “The dream of the GDS plus SME landscape to shape and drive the digital and tech agenda of government is now in the hands of McKinsey.”

They added: “Whoever builds the business cases is obviously best placed to win the follow-on works.”

We asked the Cabinet Office questions about the length of the procurement and who was involved in the decision making under that process. It confirmed that Lord Agnew - a public exponent of SMEs and a fierce critic of large consultancies - had not been involved in the appointment of McKinsey. We also asked if there had been any any other hires or secondments from McKinsey, to which it responded that all "recruitment is undertaken in line with normal Civil Service regulations."

A government spokesman also sent us this statement. “McKinsey & Co was awarded a contract to supply management consultancy services to the Central Digital and Data Office for a period of eight weeks. This followed an open and transparent tendering process which went through all of the normal processes for such a contract”.

The Cabinet Office would not confirm whether any SMEs bid for the contract, merely confirming they had been “able to”. It refused to reveal even how many suppliers subsequently responded, saying this was “commercially sensitive”.

When we asked whether McKinsey had been doing work for the Cabinet Office on the UK government’s future technology strategy, a spokesman responded: "No. McKinsey & Co are supplying management consultancy services looking at a number of business cases."

The statement of requirements, which The Register has seen, calls for "expert consultancy support to design the cross-departmental approach to tackling core digital, data and technology (DDaT) priorities, developing cross-government business cases and work plans across five priority areas in preparation for Spending Review 2021."

£4.7bn keeping legacy tech up to scratch - and getting 'value' from datasets

The appointment of McKinsey comes just three weeks after the publication of an independent report entitled Organising for Digital Delivery written by the Digital Economy Council to advise of the optimal way to “organise the Government’s Digital, Data and Technology (DDaT) function going forward” to meet “some of the greatest challenges in a generation” - including COVID-19 and Brexit.

The CDDO and the Modernisation & Reform Team in the Cabinet Office are supposed to act on its findings, which include a damning assessment that it is "essential to re-focus and add teeth to a, perhaps smaller, but more capable central function within Cabinet Office and under the leadership of the [CDDO] focusing on the areas where it can add value over and above that provided by the work of individual departments."

The report focused on central government but made analysis and recommendations that are also relevant to the broader public sector. The headline issue was classified as the "uncertain quality of technical product delivery", with many examples of successful project delivery offset by numerous ones that failed, with the common cause for the latter a failure to follow established best practices in product development.

“These include clear technical product ownership, an iterative approach to feature development with a ruthless focus minimising feature and scope creep, and a commitment to ongoing product maintenance and feature development in the light of observed user behaviour – all features observed in the more successful recent projects.”

For example, the Ministry of Justice built an online service that lets citizens book visits to people in prison, and following launch the take up was 60 per cent, but funding disappeared and the “service atrophied, the tech stack atrophied and take up has fallen right away.”

Perhaps the most eye-opening challenge - listed as second - is technical debt that has built up in central government. The report highlighted research by Government Security that almost 50 per cent of the £4.7bn spend on IT in 2019 was dedicated to “keeping the lights on” activity on “outdated systems”.

“The challenge is by no means limited to government services as there is a universal temptation to invest in new feature development vs. the 'worthy but dull' task of ensuring security and stability in the underlying platforms.”

The Home Office has, after three to four years of effort, 'not been able to retire any of their 12 large operations legacy systems'

Over the next five years this weakness is projected to cost government - or rather, taxpayers - between £13bn to £22bn. By way of example, the Home Office has, after three to four years of effort, “not been able to retire any of their 12 large operations legacy systems.”

“The study further assesses that some Departmental services fail to meet even the minimum cyber-security standards, and the inability to extract usable data from these legacy systems has been cited by multiple interviewees as one of the greatest barriers to process transformation and innovations across Government,” it adds.

Other issues include comparatively weak operational performance monitoring that reviews operational metric and progress on projects; lost opportunites in procurement with government failing to use its economies of scale; collecting but not analysing data; a low technical fluency across civil service leadership; and confusion over the role of central functions.

This last one pertains to GDS losing its powers, including the migration of data policy moving to the Department of Culture, Media and Sport in 2018, (and subsequently to the Cabinet Office in July 2020), as well as more departments generating their own tech outposts.

“This has, perhaps inevitably, raised a concern that GDS has to some extent “lost its way” and would benefit from a refocusing around its central mission. When McKinsey surveyed permanent secretaries about the role of the centre in late 2018 they found that, of all the centrally operated functions, departments had least confidence in GDS.

Maybe the big consultancies would perhaps prefer there is not a central office that is strategising and advising departments on technology. That is, after all, how they make a living.

The solutions to those problems are listed here.

According to another senior figure in government IT circles, the Modernisation and Reform report "doesn't go nearly far enough".

"The arguments appear to centre mostly around 'digitisation' rather than the 'digitalisation' of government, strategic realignment and more fundamental machinery of govt reform that is actually required." ®


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